In July 2011, the Canadian Securities Administrators published
for comment a new governance and disclosure regulatory regime for
issuers with securities listed on venture exchanges, such as the
TSX Venture Exchange and the Canadian National Stock Exchange in
Canada. The proposal, which is open for comment until October 27,
2011, has been designed to (i) streamline and tailor disclosure
requirements to balance the ability of venture issuers to manage
those obligations with the needs and expectations of their
investors, and (ii) consolidate the bulk of the requirements
applicable to venture issuers in a single instrument, National
Instrument 51-103 Ongoing Governance and Disclosure
Requirements For Venture Issuers.
Specifically, the new national instrument is intended to:
simplify the disclosure regime applicable to venture
reduce disclosure redundancies;
focus on disclosure requirements of more value to investors in
the space; and
enhance governance standards.
Highlights of the Proposal
Changes to Continuous Disclosure Requirements
Features of the proposed new continuous disclosure regime
include the following:
Annual Report – Within 120 days from financial
year-end, a venture issuer would be required to file a
comprehensive annual report that would combine in one document
business, governance and executive compensation disclosure, audited
annual financial statements, associated MD&A and CEO / CFO
certifications. This would consolidate and replace current annual
financial disclosures, certain compensation and governance
disclosure currently required to be disclosed in management
information circulars and the annual information form requirement
(which currently must only be filed by venture issuers that wish to
be eligible to file a short-form prospectus).
Mid-Year Report – Within 60 days from each midyear
period, venture issuers would be required to file a mid-year report
that includes a six month (unaudited) interim financial report,
associated MD&A and CEO / CFO certifications. Venture issuers
would no longer be required to file interim financial statements,
MD&A and CEO / CFO certifications on a quarterly basis.
Material Change, Related Entity Transaction, and Major
Acquisition Reporting – Venture issuers would have a
single form on which to report material changes, related party
transactions and major acquisitions. The financial reporting
relating to business acquisitions would be similar to that
currently required under the business acquisition reporting rules,
but would only be triggered by larger acquisitions (i.e. those
acquisitions where the consideration paid by the venture issuer is
100% or more of the market capitalization of the venture
Delivery of Continuous Disclosure Documents – Mailing
of disclosure documents would no longer be mandatory. Instead,
venture issuers would only be required to physically deliver
disclosure documents upon request.
Enhanced Governance Responsibilities
The proposal introduces new substantive corporate governance
requirements for venture issuers. Pursuant to these new
requirements, venture issuers would be required to:
develop policies and procedures to address conflicts of
interest and related party transactions;
develop policies and procedures to reduce the risk of insiders
trading when in possession of material undisclosed information
(consistent with the guidelines for all reporting issuers presently
ensure that the audit committee is composed of at least three
directors, a majority of whom are not executive officers or
employees of the venture issuer (under current rules venture
issuers are exempt from the audit committee independence
provide enhanced corporate governance-related disclosure.
Changes to Prospectus Requirements
The proposal includes a number of amendments to both the
long-form and short-form prospectus rules applicable to venture
issuers in order to simplify the regimes and streamline them with
the other proposed disclosure requirements. For example, under the
proposed amendments, venture issuers would only be required to
include two years of audited annual financial statements in a
long-form prospectus, as opposed to the three years that are
required under the current regime. In addition, all venture issuers
that have filed the new annual report would be eligible to file a
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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